What is a Niche Market in Real Estate?

Taking advantage and focusing on a particular niche market in real estate can give you several benefits and increase your chances of success if you are not already a huge company that caters to a broader market.

In this article, I will give you the general definition of a niche market, the downsides and upsides, and also a matrix overview of 73 different types of real estate niche markets.

With this matrix, you will be able to generate and brainstorm new real estate niches.

The Definition of a Niche Market

While there are different opinions about how to pronounce the term “niche,” the situation looks better and less controversial when it comes to defining a niche market.

It is basically a subgroup or segment of a larger market with its own demands and preferences.

By focusing on niche markets, businesses can often provide better solutions to the needs of specific consumers than competitors targeting a larger or broader audience.

These audiences are often overlooked, and for the same reason, the loyalty of those customers to niche-focused businesses can be higher.

For instance, instead of building just properties in a certain price range, a real estate developer could focus on building only green homes under a certain green building standard.

How to Find and Develop a Niche Market

An important key element to determine and find a niche market is doing good research.

This research is important because you want to find out about already existing segments, ones that are underserved, or new ones that could be newly developed.

Should you find a niche market without competition, it can very often be a trap.

Why?

Because more often than not, if there is no competition at all, it means that it isn’t really profitable, or other businesses couldn’t make it profitable, than you having struck gold.

Of course, chances for the latter case always exist, but this scenario shouldn’t be overestimated.

Chances are usually higher that other businesses couldn’t manage to make it profitable.

But this doesn’t necessarily mean that you can’t.

Maybe you have a certain edge in the particular niche market that will enable you to do what the majority of other businesses couldn’t do, and you can make the respective market niche profitable, even though the chances are rather against you.

The ideal condition would be to find and develop a market niche with room for growth, accessible customers and some competition that is not too dominant.

You can approach a potential niche market from different angles, such as:

• Interests and hobbies
• Geography
• Values
• Income
• Price
• Quality

What are the Upsides and Downsides of focusing on a market niche?

Focusing on a niche market has several upsides:

• You will deal with fewer competitors.
• You can better focus your business efforts.
• The chances of customers being loyal to your business are higher.
• It is a bit easier to provide expertise for a particular market niche.

Offering more niche products and services will enable you to compete less, but again, there is always the risk of being too niche and thus not having a large enough market to target.

There is also a lower risk when it comes to competing with price and getting into a draining “price war.”

And finally, you can better target the specific needs of your target customers.

For example, as a realtor, you might have more competition when you focus on second homes in geographic areas that attract vacationers.

But suppose you only focus on second homes with great views?

In that case, you will be able to make yourself more unique, differentiate yourself from your competition, and cater to a specific need of a potential home buyer in this vacation spot.

This will also give you the chance to become a specialist in the respective niche with its related products and services.

Once you are a leader in this niche, you can also expand our products and services into broader markets.

What Are the Downsides of Niche Markets?

There are, of course, also some downsides when it comes to niche markets.

One I already mentioned above, which is to niche down too much, to the extent that you won’t be able to target a large enough target audience.

Another downside is becoming too dependent on a product or service.

This situation can increase the risk of becoming vulnerable to market changes.

The next downside is that once you have success, the number of competitors may increase, and competitors, in general, can quickly move in.

So it is important to make sure you develop a niche with a certain degree of barriers to entry.

Without enough barriers to entry, larger companies with enough capital can start competing more easily with you.

The 73 Types of Niche Markets in the Real Estate Industry

There are plenty of different niche markets in the real estate industry you can take advantage of. The following large list of 73 will give you an overview.

And as always, your marketing strategy or plan will highly depend on the niche you are going to target.

Each niche has different potential target customers that need different communication approaches and can be reached best by one or several different marketing channels.

The niche you want to approach also depends on the type of real estate professional you are.

Some niches are more appealing to investors and others that are more appealing to realtors and other real estate professionals.

So, first an overview:

The short paragraphs below will explain what these different niches are.

For that, I picked a small selection of niches from each category.

By the way, the above table is not just a table; it’s actually a matrix, which you can use as a tool to brainstorm and find further real estate market niches.

You do that by combining different ones.

You can get quite creative in creating new sub-niches by combining these niches vertically and horizontally.

For example, you could create the niche of tiny houses located close to golf courses for members of the military that are single.

The more you combine, the narrower the niche gets, as does the risk of getting too narrow and ending up with a potential target audience that’s too small.

Niche By Property Type

1) Commercial Real Estate – Retail

If you look for the most diverse section of the commercial real estate market, then it’s the retail sector.

These are properties, such as shopping centers, individual stores, ‘big box’ stores, and pop-up shops.

2) Commercial Real Estate – Office

This sector of commercial real estate entails all kinds of office spaces that can be found in smaller or larger buildings.

There are two types: urban and suburban.

The urban ones can be found in cities and there in skyscrapers and other high-rise properties.

The smaller ones are often grouped in office parks and belong to the suburban office spaces.

3) Condos & Townhomes

An apartment owned by one individual within a building of other condominiums can be called condos or condominiums.

As a condo owner, you usually have to contribute to maintenance and amenity services via so-called HOA (homeowner association) fees.

Townhomes are similar to single-family homes.

They are multi-story homes and are part of a multi-unit complex.

Its walls usually border neighboring units. The occupants are mostly tenants, but you can purchase them too.

4) Green Homes

When someone calls a home a green home, it usually means that it was built sustainably with environmentally friendly materials.

Additionally, it is also built with a focus on the efficient use of water and energy.

There are different green building standards that can be used as guidelines but also to better market a green home afterwards, such as:

• International Code Council’s 2012 International Green Construction Code (IgCC)
• ANSI/ASHRAE/USGBC/IES Standard 189.1-2011
• ICC 700-2012: 2012 National Green Building Standard (ICC 700)
• Green Globes™
• US Green Building Council’s Leadership in Energy and Environmental Design (LEED®)
• The International Living Future Institute’s Living Building Challenge™, version 2.1 (May 2012)

Niche By Contract

1) Mineral, Air and Other Property Rights

Mineral rights and air rights are always in relation to a certain type of land.

The first one relates to resources located underground, such as oil, silver, or natural gas.

At least in the U.S., mineral rights allow the owner to exploit any natural resources found beneath the land.

There are different online auction providers and brokers, such as EnergyNet and Oil & Gas Asset House (source).

Air rights are the property interest in the “space” above the earth’s surface.

When owning such rights, you will have the right to use and develop the space above the land without interference by others.

2) REITs (Real Estate Investment Trusts)

REITs, also known as real estate investment trusts, are inspired by mutual funds.

It’s an incorporated company that owns, operates, or finances income properties.

To legally operate as a REIT, you need an entity that is taxable for federal purposes, such as a corporation.

Directors or trustees must also govern it, and shares must be transferable.

Another requirement is that it must have at least 100 shareholders, not five or fewer than five individuals can own more than 50% of the value of the REIT’s stock.

This isn’t allowed for the last half of its taxable year (source).

A REIT makes it possible for individual investors to earn dividends from real estate investments without having to deal with tasks a direct real estate investor would have to deal with, such as finding a deal, buying, managing, maintenance, tenants, and financing.

This is possible because REITs can pool the capital of numerous investors.

3) Crowdfunding Loans

Crowdfunding loans are part of something called peer-to-peer lending.

If you want a loan like that, you basically do the same as applying to a bank for a loan.

The difference is that the money doesn’t come from a bank, creating fiat money from thin air, but from already existing funds contributed by multiple investors.

This can be an interesting alternative for individuals and businesses that didn’t manage to raise funds by going the traditional banking route before.

Niche By Demographic/ Life Situation

1) 55+/ Baby Boomers

I’ve already discussed this in-depth in this article about how to market to baby boomers.

You can also exclusively focus on this niche and cater to the needs of Baby Boomers.

Real Estate trends for baby boomer are, for example:

• Renting in Urban Areas
• Communities of Like-Minded People
• Rural Living

2) Hispanics

Since Hispanics will allegedly comprise 56% of all new home buyers in the U.S. by the year 2030, this is another demographic that you may want to consider as a real estate market niche (source).

Here are some areas where Hispanic homeownership is growing:

• District of Columbia
• Wake County, North Carolina
• Washoe County, Nevada
• Pasco County, Florida
• Gwinnett County, Georgia

3) Single (Women)

There is an interesting sub-niche within the Millennial homebuyer generation, but also other generations, such as Gen X and Baby Boomers.

It’s singles and particularly, single women.

A slightly older statistic, but in 2015, only 9% of purchases accounted for single men in contrast to 15% of single women.

This contrast is strongest in the age groups of 51 to 60 and 61 to 69.

The main reasons for this developing trend is the loss of a spouse and the need to downsize afterwards.

There is also the potential of a niche combination between the single women niche and tiny houses. Just an idea.

Niche By Geography

1) Overseas Retirement Properties

This type of niche is kind of self-explanatory.

It’s all about properties that cater to retirees that have the wish to retire overseas.

The reasons for this decision can be manifold.

Very often, it’s because of climate reasons, so they can become winter birds and live in a better climate during the colder month of the north.

Other reasons are the lower costs of living in places outside the U.S.

2) Walkable Neighborhoods

Walkability is part of a real estate niche within the larger niche of wellness real estate, focusing on health.

It is a measure of how friendly a certain neighborhood or area is to walking.

The following are factors that influence the walkability of neighborhoods:

• Presence or absence of footpaths
• Quality of footpaths or sidewalks
• Traffic and road conditions
• Building accessibility
• Safety
• Land use patterns
• Residential density
• Frequency and variety of buildings
• Presence of trees and vegetation
• Entrances and other sensations along street frontages
• A high number of places to go to near the majority of homes
• Street designs that work for people, not just cars

Niche By Need

1) Vacation Rentals

Vacation rentals don’t need much of an introduction.

These are mainly properties in tourist hotspots.

This can be the mountain cottage close to a ski resort or the beach house with great views and nice ocean breezes from the sea.

These are properties that can be interesting to focus on as a realtor to cater to investors and/or as an investor to generate income from vacation rentals.

Depending on the tourist hotspot, you will have to deal with different target customers, which need to be communicated to by using the right marketing channels.

2) Supported Living

Individuals with disabilities and their families mostly need supported living properties.

These properties are usually connected with some sort of residential service to help the individuals or inhabitants attain or retain their independence.

3) Turnkey Rentals

From the investor’s perspective, turnkey rentals are basically already income-generating properties, where the whole part of finding, negotiation, closing, on a case by case basis, fixing, and putting a tenant in is already done for you.

It is almost like a real estate investment trust; the difference is that you will need more capital because you buy the whole property and not just a share of a pool of several already rented out properties.

The company offering turnkey rental properties usually also has property management in place.

It is usually the same one that screens the tenant that is already in place, generating the investor income before the close takes place.

Niche By Seller Situation

Generally speaking, the niches that result from different seller situations are usually more troublesome and from situations where sellers have a harder time.

This is the underlying condition in almost all cases.

1) Fixer Uppers & Properties with Structural Issues

These are run-down properties, where sellers for different reasons (very often financial or legal ones) couldn’t or didn’t want to invest more money into their properties for renovations.

Related to these fixer uppers are also properties with structural issues that might be more challenging to fix.

The fixer-upper investor usually buys such property for cheap, fixes it and then re-sells it, ideally at a profit.

2) Tax Delinquencies

Some sellers can’t or, for some other reason, couldn’t pay property taxes and become delinquent.

This is often an opportunity for real estate investors to negotiate a good deal with the seller to buy the property, provided he cancels the tax liability by making the purchase.

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